stevemc25

Who am I?

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My name is Steve McWhirter. I am not an investment adviser, but I have a 35 year long keen interest in silver as an investment. My day job for the last 30 years has been as a Computer Tech. I have found that logic, facts and truth are necessary when troubleshooting a computer problem and they are necessary when trying to determine what is going on with silver. I have been thinking about this website for over 2 years and think now is the time that it will hopefully make a difference. See Why not us?

By the way- for any hardcore Nebraska Cornhuskers football fans – I am not the Steve McWhirter who played for them from 1978 – 1982, he is my cousin.

You can contact me by a Disqus comment or email me at [email protected].

LINKS

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Following are a list of Links that I have found useful for silver info:

Ted Butler– the best precious metals commentary that I have found. He does talk about both gold and silver, but has a keen awareness of the uniqueness of the silver market.  Subscribers  typically get 2 articles per week for $34.95/month.  He also has a Free Archive of articles that he has released to the public over the last 11 years.
https://www.butlerresearch.com/

Ed Steer’s Gold and Silver Digest– great information on the PM market. Subscriber get charts, much trading info, commentary and links to other interesting articles, 5 days per week for $100 per year. Steer also seems to usually publicly post his Saturday article to SilverSeek.com- the next link listed.

Homepage

SilverSeek.com has good commentary about the silver market. The articles that Ted Butler makes public are often put on this site.
http://silverseek.com/

Kitco is a good place to go for both live and historical gold and silver prices. Following is a link to the Live Silver Price.
http://www.kitco.com/charts/livesilver.html

Another site that has information about silver and gold.
https://www.silverdoctors.com/

The Silver Institute publishes much info about silver including the Supply and Demand info that I have used often on this site.
The latest Silver Institute survey is at:

SILVER SUPPLY & DEMAND

The following is a great graphic/visualization of different markets- silver is the smallest listed:
https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2020

Silver Manipulation

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Again, I think Butler has done a great job of reporting on the silver price manipulation. Following is my attempt to distill how this manipulation has been working, but this explanation is based mainly on Butler’s articles and if you want to dig deeper that is where you should go.

There are 2 groups of traders that do a large portion of the silver trading- the Commercial traders (large banks) and the Managed Money Traders (MMT) (consisting largely of Technical Traders). The Commercials for years have had a large silver futures short position. Typically, the top 4 and top 8 short positions are Commercial traders. The Technical traders buy and sell based on price signals. They are heavily influenced by the 50 and 200 day moving averages (MA). They buy when the price moves above the MAs and they sell when the price moves below the MAs. The Commercials are able to manipulate the price by using High Frequency Trading, spoofing and other tricks, so they can move the MMTs in and out of trades to the advantage of the Commercials. Butler states that the Commercials have never taken a loss on these trades in the last many years until lately. This would defy logic in an un-manipulated market.

I see much commentary out there where people are arguing about exactly who controls this manipulation or why it is happening. The same can be said about Butler’s claim that JPM acquired 1000 Moz. (a billion) of silver over the last 9 years. I think it would be nice to know exactly who is doing what and why, but I don’t think we are going to get that certainty at this point. The main focus needs to be ending the manipulation and then what follows from that will tell us much as to the “who & why”.

Butler’s contention has been that JPM has manipulated the silver market to make a profit. Another “reason” thrown out by some is that JPM has tried to manipulate PM prices to keep the USD strong. I think the profit motive is the stronger case, but the USD motive might be the reason the USG doesn’t try to stop this manipulation.

To me the CFTC’s* COT* report shows the silver manipulation. Butler and others report on the COT each week and it seems that there are more and more commentators talking about the precious metals market and silver in particular. I find it interesting how often I see articles raving about the upside potential of gold and then in their final paragraph they will say “and silver should do even better”.

Remember that both the Commercials and Managed Money Traders (MMTs) are speculators- very little if any legitimate hedging involved. Compared to the annual production of silver the top 8 silver shorts are currently (2/22/21) short about 4.8 months of world silver production. Even more egregious, they are over 18 months short compared to Available Silver Production for Investment (I’m calling this ASPI- see ASPI). This is no more than a high stakes gambling game and the commercials have always fleeced the MMTs up until about a year ago. For the last year the big 8 short traders seem to be “stuck” in their short position and haven’t been able or willing to buy their way out.

Gold

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Gold and silver have been used as money for millennia until relatively recently.  But, even though they have a historical connection, the current fundamentals of each are very different.  Following are some facts:

Gold

Silver

There is an estimated 6 billion ounces of above ground gold.

There is an estimated 2 – 2.5 billion ounces of above ground silver bullion in 1000 oz. bars which is the main form used for silver users and investors. About 25 Boz. total in all forms.

Gold has a market value of about $11.6 trillion (at $1940/oz) or about 200 times the market value of silver.

This stockpile of silver has a value of $54 – $68 billion (at $27.10/oz.).

A small percentage of gold gets consumed each year for fabrication/jewelry

Silver is consumed in industry. About 75% of the silver mined for the last 9 years has been consumed with only about 18% of the supply being recycled.

Recently (09/20), the gold/silver ratio has been running around 70:1 and was over 120:1 in March 2020.

Historically, the gold/silver ratio has been much less. Think of the $20 gold piece and the silver dollar- about 16:1 due to the metal weight differences. This is also one of the only disadvantages of silver is that it is heavier per value by that same ratio.

I think that gold will do well in the foreseeable future, but I think silver will do even better.  I see commentators saying that gold is going to $5000 per ounce and higher and they may be right.  But, historically when gold goes up the gold:silver ratio goes down.  In 2011 when silver hit almost $50/oz. the Au:Ag ratio was at 31.5:1.  So, if gold goes up to $5000/oz and the ratio is 31.5:1 then silver will be $158/oz.  

Supply & Demand

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The following table shows the average silver supply and demand (use) averaged for the last 9 years according to the Silver Institute 2020 Supply & Demand report.

Silver Institute 2020 Averages 2011 -2019 Moz.
Mine Production 845
Net Government Sales 2
Recycling 184
Total Supply 1030
Demand
Jewelry 188
Photovoltaics 74
Photography 43
Silverware 52
Other Industrial 410
Total Demand 767
Surplus 263

About

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This post is about the structure of this website. I want it to be a cross between a forum and a blog. I want people to contribute their opinions, questions and ideas. Please help me make this site better and to provide the info that you are looking for. I want to provide info that will help get a silver newbie up to speed and help the silver expert determine how to best invest. The main focus of this website will be to help us determine how we can end the silver manipulation and make some money while doing that.

I had written some of these articles over 2 years ago. I have gone thru and updated the older articles and added new ones, but if you find any references to facts out of date, please let me know. Anytime I use words like – currently or recently – I try to put a date after because I find so many websites where you don’t know what time frame they are speaking of and it can make a big difference.

I also always try to stick to troy ounces as the default measurement. I see some sites and commentators who use tons or tonnes, I have seen metric tonnes and troy tonnes. I have put the conversions of tonnes into ounces or million ounces (moz.) in the Glossary for reference, but I like to use ounces. The average person buys in ounces, price is quoted in ounces and future contracts are sold in ounces.

As you may have noticed I am using quite a few links- both internal and external.  I want people to go as deep and fast as they want.  If you have spent a few hours on this and other sites and are not convinced that silver is a GREAT investment, then silver probably isn’t for you.  I personally don’t understand how ANYONE can understand the silver story and not see the huge potential, but I do understand that is is not an investment for all. Matter of fact it can’t be, there is not enough silver.  I try to be objective about silver, present the facts and then do the actions that we can do to start the snowball rolling down the hill. 

You will notice that I put some words in caps.  I am shouting certain things for effect.  I know that can make the narrative look “cheap”, but there are things that I want to emphasize and stand out.  I know that I am at best an average writer, but I do have a good editor (my wife) although I don’t know that she will have time to edit all my ramblings.  I want and need your feedback.  Comments are going to be a very important part of this site.  Butler is often asking his readers to tell him if they see things differently and that is what I want also. 

I am using many abbreviations and TLAs (Three Letter Acronyms) and will try to have them spelled out at least on the first article that I post them in, but I will also put them in the GLOSSARY for definitions.

Please let me know if you agree or disagree with anything that I am saying, as long as that is done respectfully and with some intellectual honesty.  What do I mean by “intellectual honesty”?  One way I would describe this is- I heard (before Covid19) that there were 6000 people that attended a “Flat Earth” convention.  Maybe it is a nice social gathering with people of like minds, but it is hard for me to believe that most of those people are being intellectually honest.  If you know something is not true and yet profess it to be true then that is not intellectually honest.  Truth is important to me. I know we can get into a whole discussion on what is truth and reality, but I think the bottom line is the world is not flat and if you are saying it is then you are either fooling yourself or trying to fool others.

Why Invest in Silver?

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I am a recreational poker player and in poker there is a term- “pot odds”. The term is somewhat intuitive and basically means that the amount you will win if you make your hand gives you odds to call (sometimes raise) the current bet. There is also the term “implied pot odds” which refers to the total amount that you assume the pot will be by the end of the hand. While I think silver presents great pot odds, I also think it has tremendous implied pot odds. In other words I think silver is currently a good investment, but if silver does what it could and should, it will be a tremendous investment. Is there a guarantee on either scenario? No, but I cannot think of another investment that has the pot odds of silver.

The big question is when? If it is going to be another 10 years before silver lives up to its potential then obviously nobody would get too excited. But I believe the key to silver taking off in price is simply awareness of the Silver Story. But, how people become aware of the silver’s status is much more complicated. I have frequently emailed most every politician and media outlet that I can think of stating the following: silver is being manipulated, it is a crime in progress, the government’s own COT report confirms the manipulation and recommend reading Ted Butler. An average investigative reporter (or ambitious intern) could glean enough information in a couple of hours to convince themselves that they could write a very interesting and important article about the silver market.

Currently the silver market setup is extremely bullish. I have explained this in the post Available Silver Production for Investment (ASPI) and other places on this site. The main point is that silver is a small market, both in supply and dollars. Any investment is a gamble and all we can do is our best to compare risk to reward. I believe that public awareness of this manipulation is growing and the silver manipulation (to the downside) must come to an end sooner rather than later. Even holding cash or putting money in a guaranteed account, has risk- mainly inflation. This makes silver a great investment. Given the current state of silver I feel there is nothing wrong with trying to logically speculate on the outcome. Following is what I think is most likely to occur with the silver market.

There are many triggers that could set silver off and up. Typically, precious metals prices go up with uncertainty as investors look to use gold and silver as a “store of wealth”. It seems to me that uncertainty is about as high as it has ever been in my lifetime- maybe with the exception of the Cuban missile crises. In my opinion is we might not even need a trigger with the big banks shorting silver by over 350 Mozs. There are plenty of other triggers that could start the silver price on an upward trajectory. I think any of the following events are more possible than “normal” and could be triggers.

  • Widespread public awareness of the silver market manipulation.
  • A major military conflict.
  • A major or series of natural disaster(s).
  • Inflation rates increase significantly
  • Gold to silver (investment) conversion
  • A physical silver shortage
  • A stock market crash
  • An investor or group of investors (the public) buying silver
  • And/or a major pandemic

I’m sure there are many other potential triggers. Let me know what you think might be coming that could be a trigger. Once the manipulation ends does that mean that the commercials (or others) won’t try to re-establish it? No, but I think once the dam is broken it is going to be very difficult to re-establish at least until the physical supply gets back in balance. So, once the price goes to $20 or more (now) there is going to be increasing public awareness of silver. Silver has been called the “poor man’s” gold because it is more accessible (pricewise) than gold. Many more people can go to their local coin shop and buy a Silver Eagle than can buy a Gold Eagle. Available physical silver is the key to ending the manipulation. There is only about 22 Mozs. of new silver available per month for investment demand compared to the annual supply, after taking out what is used for industry and fabrication. See the Silver Institute annual survey under the LINKS.

The next leg up will be to $30+ as the public gets more excited about silver and buys more physical and EFT silver. As the price goes up and potential supply bottlenecks, the industrial users will become concerned about making sure they have silver so they can make their products. Some of these users may start looking for alternatives to silver, but that won’t happen overnight. Silver producers (miners) will look to mine more silver, but that won’t happen overnight either. Recycling/Scrap will increase but that will also take some time to get into the “pipeline”. If industrial users try to increase their inventory this could cause a sudden demand of about 50 Mozs. See my post on Physical Supply for some more details on this scenario. The combination of investment demand and potential industrial demand will cause silver to go up to $50/oz. Silver between $30 – $50/oz. will be getting a lot of attention and the public awareness will snowball. Remember when the housing market was booming and you had everybody and their cousins flipping houses?

Once the price hits and goes over $50/oz. I think the silver market will get really hot By this time MSM will be reporting on silver (and gold) and increasing numbers of people will be trying to buy into an already very tight silver market. I think it could take a year or so from the time silver breeches $20/oz. until it gets to $50/oz. It could happen slower or faster, but I think a year is a good guess. The last time silver hit a high ($48.70/oz.) it took about 7.5 months (163 trading days) to go from $20.31/oz. to the high. Once it goes over $50/oz. I think it will go up to $100/oz. fairly fast- maybe just a few weeks or months. Over $50, we are in uncharted territory. There may be investors trying to short silver to cap the price, the USG could be looking at ways to stifle demand- including confiscation, the COMEX may stop trading and/or be in disarray. Any of those things could cause a lot of price volatility. I think anyone invested in silver will need to be on their toes. I am not forecasting what WILL happen, just what I think could happen and in some instances what is likely to happen. The main point is there could be several different routes on how we get there ($50+) and there will be many different things happening, so we will need to evaluate the situation at that time. I have seen predictions of silver at $100, $200 and even 1:1 to the price of gold. Obviously, I or no one else KNOWS what the price of silver will be and we will only know the high price once it backs off.

I do think that at some point after $50 and more likely after $100/oz. that silver will get into a “bubble” situation, so trying to hang in until the absolute top could get very tricky, but depending on how wild it gets could be very profitable. From now (9/27/20) at $24.00 to $100 is a 300%+ gain. To grab a number that sounds reasonable to me I would say that silver in an un-manipulated market should be around $50/oz. (based on 2020 dollars). I think things will “get bumpy” (be volatile) once silver goes over $50, up to the top and then back down to what will become a stable price range.

The other big plus for silver is the current silver to gold (Ag:Au) ratio compared to historical averages for this ratio. Currently, it is up around 80:1 (takes 80 ozs. of silver to buy 1 oz. of gold). Historically, that ratio has been more like an average of 55:1 and lower. Typically as silver prices rise the Ag:Au ratio goes down. At the two highs of silver on 1/18/1980 ($49.45) and 4/28/2011 ($48.70) the Ag:Au ratio was 17.2 (approx.) and 31.5 respectively. So, even though the gold price is likely to increase, the silver price is likely to increase by twice as much or more. The above ground gold market is estimated to be worth $11.4 trillion at current (10/2/20) price of about $1900/oz. So, what would happen if/when silver starts going up, 1% of gold were to convert to silver. That would be $110 billion dollars and at $24/oz. that would buy over 4.5 billion ounces of silver. The only trouble is there are only 2 -2.5 billion ounces of silver above ground, at least in 1000 oz. bars. The graphics at Markets gives a very good visualization of the size of different markets.

So, silver is the golden child, so to speak. What could go wrong? As I have said I think the run up of the silver price could be very volatile, but I also think the pot odds are very good. See the section of Risk & Disadvantages to get an idea of some of the risks as I see them. Please comment with ideas of either the advantages or risks of silver investing.

Comment Parameters

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As I have said on these pages the information given is my opinion. Please comment with your opinion and info. I am hoping that we can help each other figure out how to best invest in silver. I just ask that comments are:

  • Respectful
  • Not obscene
  • Intellectually honest

This site uses Disqus for comments, please create an account for yourself if you don’t already have one.

Physical Silver Supply

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The key to price with any commodity is normally supply vs demand. The more supply compared to demand means the price goes down. If demand is stronger than supply then prices go up. Those rules break down in the manipulated silver market. But, basically by manipulating the price down the manipulators have kept investment demand down. The industrial demand for silver has remained fairly consistent for the last few years- about 750 million ounces. You can look at the last Silver Institute survey.

Silver Institute Survey

You’ll see that both the supply and demand have averaged pretty consistently (within 10%) between 2011 – 2019. Between the industrial usage and the silver used for jewelry and silverware there are only 263 million ounces (9 year average) left for investment demand. This is only 22Moz. ounces per month. Think about most manufactures these days. They typically operate on a “just in time” supply system. They want to have as little inventory as possible. Ted Butler wrote a good article on this years ago.

http://www.investmentrarities.com/ted_butler_comentary03-05-02.shtml

So for many if not most industrial silver users, silver is a small part of the total product. I have heard that there is about an ounce of silver in a car. The car manufacturer is much more concerned that the assembly line remains running than what the price of silver is. I don’t know what amount of silver manufacturers keep on hand, but to make it easy let’s say it is one month’s worth. Now say there is a physical silver shortages. Deliveries are delayed. The natural actions of the purchasing agents would be to build up silver inventories. The manufacturer would want to at least double their lead times and probably more. So, currently the manufacturers use over 60Mozs./per month. Then, due to a shortage they want another 60Moz. to build their silver inventory and they want it now. There is only an average “extra” 22Mozs. “new” silver available per month that is currently being bought with investment demand. So, just an extra 60M oz. demand would put a strain on the current supply and demand causing prices to jump, causing more investment demand, causing more strain on physical silver inventory. I think there are many “triggers” that could cause silver prices to start moving up, but at some point I think that price rise will go into high gear once silver supply is constrained given the way people will react to supply shortages and higher prices.

Butler has reported that since 2011 JPM has been building a physical silver inventory. He claims that currently they own about 1000 Moz. of silver. This silver hoard definitely is a wild card in trying to predict the when and how of ending the silver manipulation. JPM has accumulated this silver inventory over the last 9 years or about 100 Mozs. per year. So, if investment demand added 100 Moz. per year that would take up the slack if JPM backs off its accumulation. Butler has also said that he believes JPM was buying Silver Eagle and Maple Leaf 1 oz. coins and probably melting them into 1000 oz. bars. From 2011 – 2016 the average US Mint Silver Eagle sales were 41.2 Moz. per year. JPM apparently backed off in 2017 and the sales were only 23.1 Moz. last year.

I have seen estimates that there is an estimated 25 Boz. of above ground silver. That seems reasonable to me. But, 1000 oz. bars are what is used for most large silver users and for investment demand. There is only 2 – 2.5 Boz. of “viable” 1000 oz. bars. At the right price silver will get recycled and melted into bars. My local coin dealer told me after the 2011 price high that he was surprise how much scrap silver came in during that period. His point was he didn’t think near as much will come in on the next price rise. In other words if people didn’t want to bring their silver items in to be recycled in 2011, then at what price would they sell now?

Please post answers to these questions if you know the answers:

  1. How long does it take from the time that silver items are recycled to when they can be turned into 1000 oz. bars?
  2. Since Silver Eagles are already .999 silver, Is it quicker to turn 1000 silver eagles into a 1000 oz. bar than 90% silver?